If my wife already paid self-employment taxes during the year, why is she getting more taken out again when filing?

[HelenC12]

TurboTax is constantly updating the refund or amount due. If your wife paid estimated self-employment (SE) taxes and it wasn't enough to cover what she earned, that may be why TurboTax calculated more income taxes. 

• Make sure you enter your wife's SE taxes in the estimated section of TurboTax to get credit for paying them. See Where do I enter my estimated tax payments?

The SE tax rate is 15.3% with 12.4% for Social Security and 2.9% for Medicare. When you pay estimated SE tax, you also have to include the federal income tax and depending on all your income, the rate could be as high as an additional 37%. 

• Note: If you live in a state that has a state income tax, you may have to pay estimated taxes to the state. 
• The SE tax is reported on Schedule SE and also calculate the deduction that goes along with it.

[topherw]

What seems crazy is she made $1986 on 1099-NEC…already had made her estimated tax payments for $302 during the year. Our overall tax refund was at $8774 before I put in her self-employment income. Once I put in her very low income, our refund dropped to $8043. That doesn’t make sense of such a drastic change in refund for such little income. Plus, we are way below the married joint income amount, so it’s not like her income threw us into a different tax bracket. Does any of that seem right?

[Cynthiad66]

@topherw - On the surface, I agree with you that it seems very high.  However, it all depends on your total income and tax rate.  You can see the summary of the return buy using the link below.

How To View A Summary of My Return

Also, make sure,  as stated by our expert, @HelenC12, you must make sure you enter the $302 estimated payment into the proper area to receive credit for that payment.  Below is how to enter that payment.

If you made estimated tax payments in 2021 towards your federal, state, or local taxes, enter them in the Estimated and Other Income Taxes Paid section.

1. Open or continue your return
2. Select Search and search for estimated tax payments
3. Select the Jump to link in the search results
4. Choose Start next to the type of estimated tax payment you'd like to enter
5. Enter the amount of estimated tax you paid at each of the quarterly due dates

[topherw]

Yes, I had already entered her estimated taxes that she had paid in the correct section based off what was paid in each quarter. If I took those out, then it would decrease our refund by that amount, so it was accounted for. I just can’t wrap my head around such a big decrease in our refund from her small amount of income. 

[JillS56]

When you entered her income, the income tax itself probably did not change much, but the self-employment tax was calculated.   What was the amount of the income tax before you entered her income and what did the income tax change to when you entered her self-employment?   Then subtract out the self-employment tax which is going to be 15.3% of her income.     Do these numbers add up to the difference?     

Without comparing the return before and after adding her income, it is hard to determine what caused the difference in tax.

[topherw]

Our overall tax refund was at $8774 before I put in her self-employment income. Once I put in her income of $1986, our refund dropped to $8043

[VolvoGirl]

Well the self employment tax is only about $281 on that.  When you enter one taxable transaction, you can't just watch the monitor.  You increased your overall adjusted gross income and with that come many other changes in your return, not just the incremental tax on the one transaction.

Like for example it increased your AGI and that would decrease some deductions if you itemized on Schedule A.  And by increasing your AGI it might reduce some credits you were getting like EIC.  And can make more of any Social Security taxable.

[KrisD15]

Your wife may have paid Estimated Payments which is applied to her Federal (or state) INCOME TAXES. 

Self-Employed Taxpayers also pay their own FICA (Social Security) tax. 

Employees have this tax withheld by their employer and sent to the Social Security Administration. Self-Employed Taxpayers pay this on their 1040 Federal return. 

When you entered the income, there would be Income Tax and Self-Employment Tax, however it sounds like you may have lost some other credit as well. Perhaps the Earned Income Credit or Child and Dependent Care Credit went down?